f = BMI forecast. Source: United Nations Conference On Trade and Development (up to 2006), BMI

Overview

Colombia is a growing market for value-added, processed and packaged food products. This growth is partly due to the expansion of mass grocery retailers, with their chilled and frozen storage facilities, and producers are set to benefit from further retail expansion beyond the largest four cities (Bogotá, Medellin, Cali and Barranquilla).

Middle-to-high-income consumers are showing a greater preference for convenience products. The prepared food market is increasingly being driven by the health and wellness trend, with health consciousness on the rise, generating an increased demand for value-added and premium products that are not generally regarded as essential.

Food Consumption. Between 2012 and 2017, total food consumption is expected to rise by 53.8% (nominal growth rate in local currency terms). This will stem from a projected 44% increase in per capita spending and a 10% increase in the size of the population. Using BMI forecasts for the COP/US$ exchange rate, this translates into total food consumption growth of just over 66.8% in US dollar terms, as the Colombian peso is forecast to strengthen considerably against the US dollar over the next five years.

Processed Food1

Confectionery. Sales of non-essential products such as chocolate have recorded some of the biggest sales increases in Colombia over the past few years, as disposable incomes have risen. Between 2012 and 2017, value sales are forecast to increase by 30.7%. Colombia's confectionery sector benefits from the fact that almost two-thirds of the population is younger than 30. As in other markets, Colombian confectionery sales are influenced by the health and wellness trend, which is reflected in new products featuring a large proportion of low-sugar and fat-free products.

Canned Food. As disposable incomes rise and more consumers start to look for convenient meal options, canned food sales are expected to increase by 30% in value terms (local currency, nominal growth rate), and by 11.8% in volume terms between 2012 and 2017. In US dollar terms, the canned food market is expected to increase by just over 41% due to the strengthening value of the Colombian peso against the US dollar. It can be expected that food manufacturers will continue to invest significantly into modernizing facilities and expanding production capacities, supported by rising investor confidence coupled with the improved security situation.

Consumption of jams/jellies in Colombia is forecast to increase through to 2017. From an estimated 1.55 kg per capita consumption in 2012, BMI forecasts this will rise to reach 2.04kg per capita by 2017. This growth is likely to be driven by increased demand for value-added and premium products from Colombian consumers. Domestic production of jams/jellies is substantial, at over 74,000 tons in 2012 and showing y-o-y growth of around 9% between 2012 and 2017.

Dairy. Due to a large percentage of low incomes, the consumption of dairy products in Colombia is lower than many other countries in the Andean region. In 2012, per-capita consumption of ice cream stood at 2.5kg, cheese at 1.35kg and butter at 0.5kg. By 2017 BMI is forecasting that ice cream consumption will increase to 3.52kg per capita, cheese consumption will increase to 1.43kg per capita and butter consumption will increase to 0.55kg per capita.

In all three dairy subsectors, domestic production is substantial accounting for the bulk of local consumption. Exports only account for a small proportion of total production. Currently, local producers account for around 98% of demand in Colombia. However the FTA agreement with Colombia removes tariffs on 52% of US agricultural trade. As a result, US producers would gain duty-free, quota-free access for whey and lactose products, as well as increased quotas for cheese, ice cream and processed dairy products. In 2010, US dairy exports to Colombia were estimated at USD 6 million.

Meat. Within overall meat demand in Colombia, consumption of sausages is far higher than that for bacon/ham. In 2012, per-capita consumption of sausages stood at just over 8kg which BMI is forecasting will rise to 12.28kg by 2016. In contrast, per capita consumption of bacon/ham stood at just 0.40kg in 2012 which BMI forecasts will edge up to 0.49kg by 2017.

Domestic production of meat accounts for the majority share of local demand in both the bacon/ham and sausages sectors. Imports of bacon/ham are greater than the level for sausages and are forecast to increase more substantially year on year through to 2017.

Healthy and indulgent products. Colombian consumers are increasingly aware of the need to adopt healthier eating habits but do not wish to sacrifice flavor. Manufacturers have responded to such demands by rapidly introducing healthier products without sugar, low in fat or free from trans fats. Good examples of this are potato chips and other savory snacks, which are regarded as unhealthy due to being fried. Soft rolls and snack bars are the categories with a wider variety of flavors and have the advantage that they can be taken and eaten anywhere, so in spite of busy lifestyles, healthier eating habits are not being cast aside.

Sweet and savory snacks the best performer in 2011 with current value growth of 8%. Innovations in sweet and savory snacks to reduce trans fats and add healthy omega-3 fats helped to drive sales by tapping into the health trend. Furthermore, manufacturers released new flavors and texture mixes to appeal to a wider range of consumers and increasingly demanding and sophisticated palates.

Beverages

Tea. The market for (hot) tea is starting to increase in Colombia due to augmented health consciousness and marketing efforts from the country's tea distributors will result in an anticipated increase of tea consumption over the next five years.

Soft Drinks. The bottled water market in Colombia offers, among others, natural gas, flavored, energizing, and functional (added vitamins and/or minerals). This niche has proven to be successful, as a result of increasing demand for sophisticated products. This will be driven by the growing presence of value-added products, in response to the increasingly sophisticated taste of consumers.

According to information provided by Raddar, the share for normal water is 15.97%, for sodas 41.12%, and for flavored 42.92%. In Colombia, a bottle costs an average of USD 1, while a functional goes up to USD 2.80. The consumption of functional waters results from a 'wave' of health consciousness where the population is more interested in buying a product for its added value than for the price.

It’s estimated that low income population consumes 40 percent of the water market, while the remaining 51 percent is the middle and high income class.

In Colombia we have a good number of companies in the water sector (containing added sugar or flavor), among them are: Coca- Cola Femsa and Postobon. It is also important to mention that major retail chains in Colombia, like Carrefour and Almacenes Exito have their own production of these beverages.

Coca- Cola Femsa, remained the leading player in bottled water in 2011, accounting for retail value sales of 46% of the market. However, the company saw a two percent decline in both its retail volume and value sales share in 2011. This resulted from competition from Postobon, which enjoyed the benefits of a strong nationwide distribution network. Postobon saw a two percent gain in retail value sales share to 38% in 2011, supported by the performance of its brands, according to Euromonitor. Both companies have 84% of the market.

In general, Colombian consumers appreciate U.S. products due to their excellent quality. Competitive prices are a decisive factor when competing in this market.

The Colombian water market is attractive for U.S. companies for various reasons:

Colombia spends annually USD 176 million

The Colombian soft drinks market is growing annually 11%

The market is still growing in Colombia, with ​​unexplored opportunities.

These developments are supported by forecasts for the sector. Soft drinks sales (in local currency, nominal terms) are expected to increase by just over 32% between 2012 and 2017. Growth for carbonates forecasted to be modest due to the increased health consciousness of consumers; however, bottled water, fruit juices and functional drinks can be expected to experience particularly strong growth as a result of the aggressive marketing and promotional strategies of manufacturers.

Alcoholic Drinks. The growing popularity of beer among Colombia's middle classes is predicted to increase volume sales by about 14% between 2012 and 2017. The growing appreciation of international premium varieties means that sales are expected to grow at a slightly faster rate.

Leading brands from international spirits firms are gradually finding markets in wealthy metropolitan areas, which will inevitably lead to an increase in consumption over the forecast period.

Best Products/Services

2011 Colombian Food Product Rankings by Country of Import

Product Category

Harmonized System Code

Rank

Country

Import Value (US$ Millions)

Meat And Meat Offal

Total

76.56

HS 02

1

United States

31.75

2

Chile

23.02

3

Canada

12.63

4

Peru

4.85

5

Argentina

2.44

Other countries

1.87

Dairy Products

Total

47.73

HS 04

1

Argentina

18.39

2

Chile

13.40

3

Uruguay

5.38

4

United States

3.33

5

Bolivia

1.84

Other countries

5.38

Edible Vegetables, Certain Roots And Tubers

Total

181.83

HS 07

1

Canada

58.84

2

Peru

34.12

3

China

33.20

4

Ecuador

14.80

5

United States

12.76

Other countries

28.12

Edible Fruit And Nuts

Total

212.65

HS 08

1

Chile

132.93

2

United States

37.43

3

Peru

10.02

4

Ecuador

8.72

5

Spain

5.50

Other countries

18.07

Coffee, Tea, Mate And Spices

Total

188.78

HS 09

1

Ecuador

86.14

2

Peru

85.57

3

Sri Lanka

7.35

4

India

2.61

5

China

1.43

Other countries

5.68

Milling, Malt And Starches

Total

17.56

HS 11

1

United States

6.49

2

Chile

2.87

3

China

1.37

4

Netherlands

1.11

5

Mexico

1.04

Other countries

4.67

Edible Preparations Of Meat, Fish, Crustaceans, Mollusks

Total

215.69

HS 16

1

Ecuador

92.20

2

Duty Free (Cartagena)

57.49

3

United States

26.26

4

Peru

14.36

5

Chile

12.99

Other countries

12.40

Sugars And Sugar Confectionary

Total

175.19

HS 17

1

Brazil

120.30

2

United States

9.40

3

Ecuador

7.73

4

China

6.72

5

Peru

6.28

Other countries

24.75

Cocoa And Cocoa Preparations

Total

90.18

HS 18

1

Ecuador

30.08

2

China

17.58

3

Peru

16.67

4

Brazil

6.38

5

United States

4.59

Other countries

14.87

Preparations Of Cereals, Flour, Starch Or Milk; Bakers' Wares

Total

147.84

HS 19

1

Mexico

38.26

2

Chile

33.33

3

Peru

19.69

4

Argentina

13.05

5

United States

7.91

Other countries

35.60

Preparations Of Vegetables, Fruit, Nuts

Total

82.57

HS 20

1

Chile

26.41

2

United States

17.18

3

Argentina

7.51

4

Mexico

6.92

5

Netherlands

6.04

Other countries

18.52

Miscellaneous Edible Preparations

Total

212.15

HS 21

1

United States

72.48

2

Brazil

66.48

3

Mexico

13.45

4

Chile

8.91

5

Uruguay

7.20

Other countries

43.63

Beverages, Spirits And Vinegar

Total

182.34

HS 22

1

United Kingdom

39.28

2

Ecuador

25.43

3

Chile

21.30

4

Bolivia

16.25

5

Argentina

11.74

Other countries

68.34

Albuminoidal Substances; Modified Starches; Glues; Enzymes

Total

109.58

HS 35

1

United States

28.66

2

Mexico

15.70

3

Brazil

14.10

4

Denmark

6.34

5

France

6.32

Other countries

38.46

Source: Global Trade Atlas

Opportunities

The U.S.-Colombia Free Trade Agreement is providing immediate duty-free access on 77% of all agricultural tariff lines, accounting for 52% of current U.S. exports to Colombia. Colombia will eliminate most other tariffs on agricultural products within 15 years. Most processed food products are receiving immediate duty-free treatment since May 2012, pastry and dessert mixes, spices, condiments (except mayonnaise), frozen vegetables, processed turkey, beer, wine, nuts, soup preparations, soft drinks, cookies, snacks, chips, among others. These products before the FTA had anaverage tariff between 5.0%-20.0%.

From May 2012 through November 2012, food and beverages imports into Colombia totaled USD 331 million, an increase of 80% compared to the same period in 2011, which accounted for about USD 184 million. The sector in general is facing significant growth.

Colombia has the third largest economy in Latin America; foreign retailers have invested significantly in the country's mass grocery retail sector since the 1990s.

Significant growth is expected, particularly in the hypermarket and smaller supermarket, or 'express' store, formats.

The Colombian mass grocery retail sector is among the most developed in the region, making it relatively easy to introduce out new products.

A well-developed retail sector is a strong outlet for packaged and value-added food products.

A young population, rising disposable incomes and an increasing number of working women are fuelling demand for higher-value, processed goods.

Increased health consciousness is creating opportunities in this high-value sector.

Soft drinks sales are expected to increase by approximately 33% over the next five-years.

Consumption of soft drinks is below average for the region, suggesting that the sector has strong potential for growth.

Critical considerations for market entry include the following:

Competition is based on quality, price and service;

U.S. suppliers should develop ways to meet the needs of the Colombian market through personal visits to better understand the market and identify needs of buyers and consumer trends;

Many Colombian companies’ representatives visit trade shows in the United States, such as Food and Beverage of the Americas and Fancy Foods Shows, which are great opportunities to meet and educate Colombian importers;

Work closely with local importers to comply with food import regulations to facilitate the registration and import of food products and minimize port of entry risks

and Challenges for U.S. Exporters of Food Products for Processing

Advantages

Challenges

The U.S.-Colombia TPA expands opportunities and market potential for many agricultural products

Colombia has trade agreements with many other countries increasing competition for U.S. products

U.S. agricultural products have a reputation for high quality

Colombian per capita consumption for processed and semi-processed products is low, such as bread, compared to other Latin American markets

Colombia is the second largest agricultural trade destination for U.S. food product in South America

U.S. products will have to maintain the reputation of higher quality in order to be competitive with local food processing companies, guaranteeing a consistent and uniform supply of products year round

A strong Colombian peso against the U.S. dollar is favoring U.S. exports

Imported food product registrations are costly, ranging from USD500 to USD2,300 depending on the product

The growth of tourism and the hotel and restaurant sectors will require a greater array of raw materials and ingredients to make final products more appealing to foreigners and fast changing domestic consumer tastes and preferences

There is a cultural misperception that frozen products are unhealthy and lack quality

The growing lower and middle income population , specifically the youth and working women of Colombia, are stimulating new food consumer trends and a growth in processed foods

Internal transportation costs from ports of entry are costly due extremely poor infrastructure

Market opportunities for health foods and organic products are expanding after surveys showed that 51% of Colombians are overweight or obese and the GOC is implementing healthy living campaigns

Cold chain is deficient and Colombians have no clear understanding of this need to maintain product quality

The best approach to enter the Colombian market is through distributors. In order to import and distribute beverage products into Colombia, products must be registered with the Colombian National Institute for Surveillance of Medicines and Food (INVIMA). It is necessary to obtain a Mandatory Sanitary Notification (Sanitary Registry). One of the requirements for this notification is the Certificate of Free Sale. Registration is valid for ten years but only for the applicant (exporter or importer) and the manufacturer specified in it.

Colombia requires country-of-origin labeling for processed foods products. However, it does not classify frozen vegetables as a processed food and, therefore, no country of origin labeling is required. Also, fresh fruit and vegetables do not require country of origin labeling. Product labeling information on imported processed products must be present at the point of retail sale. The responsibility for this labeling information rests with the importer, not the retailer. Many Colombian importers arrange for this information to be placed on the product by the exporting firm, before it enters Colombia. Labels on processed food products must indicate: the specific name of the product, ingredients in order of predominance, name and address of manufacturer and importer, number of units, instructions for storage and usage (when required), and expiration date.

With its network of offices across the United States and in more than 70 countries, the U.S. Commercial Service of the U.S. Department of Commerce utilizes its global presence and international marketing expertise to help U.S. companies sell their products and services worldwide. Locate the U.S. Commercial Service trade specialist in the U.S. nearest you by visiting http://www.export.gov/eac.